Planned tax avoidance laws up for scrutiny

Companies wanting to express their views on the Turnbull government's push to give the tax office more powers to counter multinational tax avoidance "should ensure that they don't go on Christmas holidays early".

Treasurer Scott Morrison has released for public scrutiny until December 23 draft laws which will provide scope for the Australian Taxation Office to identify large multinationals seeking to avoid tax by shifting profits.

It will also allow the commissioner of taxation to impose a penalty tax rate of 40 per cent on arrangements that are caught in breach of the rules.

"The Turnbull government is determined to ensure that all companies that operate in Australia pay the right amount of tax here," Mr Morrison said in a statement.

"Under our new law, where they use complex global structures to avoid tax on Australian earnings, they will pay even more."

Mark Molesworth, tax partner at consultants BDO, says the new laws put a "figurative gun-to-the-head" of Australian subsidiaries of multinationals and are a wake-up call for all those potentially affected.

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"The new ATO powers effectively mean that a company can be forced to participate in a review and they cannot challenge the ATO findings based on new evidence not shared with the ATO," Mr Molesworth told AAP.

"They need to have their transfer pricing policies and documentation ready in advance of any ATO contact."

On the 40 per cent penalty rate - compared to the usual 30 per cent company tax rate - Mr Molesworth said this would be imposed on profits allegedly diverted to a "low tax jurisdiction".

He says this is any country with a rate of tax less than 80 per cent of Australia's.

"At present, this means that a majority of the OECD countries will be low tax, as will the USA if president-elect Trump succeeds in reducing the corporate rate of tax," he said.